Sops brew for export laggards

New Delhi, Nov. 18: The government plans to boost exports by offering incentives to sectors that have not performed well.

The development follows the contraction in shipments for the sixth straight month in October.

Officials said sops such as interest subvention (subsidy), likely to be announced later this month, could be extended to engineering, gems and jewellery, auto components, leather and pharmaceuticals. The relief is now available to handloom, handicraft, carpets and SMEs.

Commerce minister Anand Sharma is likely to meet finance minister P. Chidambaram this week to discuss the incentives to be offered.

Exports fell 1.63 per cent to $23.25 billion in October compared with $23.6 billion in the same month last year on the back of a persistent slowdown in demand in developed markets.

Increased oil purchases has led to a 7.37 per cent rise in imports at $44.2 billion in October against $41.18 billion in the year-ago period, leaving a trade deficit at a record high of $20.96 billion.

According to figures by the commerce department, while exports shrunk 6.18 per cent to $166.92 billion between April and October, imports dipped a meagre 2.66 per cent widening the trade deficit to $110.21 billion. Officials said the ministry planned to "add more sectors under the 2 per cent interest subvention (scheme)".

"We will see if there is a need to fine-tune this year's foreign trade policy or whether specific steps need to be taken to improve export performance," commerce secretary S.R. Rao said.

Ajay Sahai, director-general of the Federation of Indian Export Organisations (Fieo), said, "Some of the concessions announced in the foreign trade policy (FTP) in June have not been implemented by the finance ministry. For instance, the policy had stated the scope of the zero-duty export promotion capital goods scheme would be enlarged and exports via e-commerce were to be given FTP benefits. These have not happened."

The Confederation of Indian Industry (CII) has asked for a reduction in interest rates at which loans are provided to exporters. Exporters pay an interest up to 12 per cent on loans compared with 6 per cent in most countries.

The CII has also made a case for an increase in the duty drawback rates by at least 3 per cent from around 2-3 per cent. Under the scheme, the government refunds duties imposed on imported inputs for export items.

"If markets such as the US and Europe are added to the focus market scheme, (FMS) Indian products would become more competitive," the industry association said.

Under the FMS, various benefits are provided to reduce high freight cost to select markets such as Latin America.

The decline in shipments comes amid India's growth slipping to 5.5 per cent in the first quarter of this fiscal and subdued industrial output.

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